Can AI Apps Replace Advertising As The Primary Mass-Marketing Tool?
How AI Might Change Marketing For Both Consumers & Sellers
By David Grace (Amazon Page — David Grace Website)
Marketing
Marketing is the process of motivating people to buy your product. It’s often a two step process:
- (1) motivating a person who isn’t thinking about buying a product of the type you’re selling to buy a product of that type, and/or then
- (2) motivating a person (a “committed consumer”) who now has decided to buy a product of the type you’re selling to buy your product instead of a similar product from one of your competitors.
Put more concretely, step one is motivating a person who isn’t thinking about putting a portable air conditioner into their guest room to seriously consider doing that.
Step two is convincing a person who now is seriously considering buying a portable air conditioner for their guest room to buy one from you instead of a unit from one of your competitors.
It’s Easier To Sell Products To People Who Have Already Decided To Buy
Obviously, sellers would prefer to deal in products whose customers aren’t even in step one, that is products whose consumers are already committed to buying a product like the one you sell.
Those already-committed-consumer products fall into two basic groups:
- (a) general-use products, things that almost everybody purchases, such as gasoline, shoes, beds, toilet paper, basic foods like coffee, flour etc. and
- (b) narrow-use products purchased by a limited class of buyers who have to buy them, such as diapers, prescription drugs, parts for machines that they own or activities they regularly engage in — e.g. golfers must buy golf balls.
Yes, this is a continuum where general use products are at one end of the scale and narrow-use are at the other with lots of products in between.
If you can skip step one, convincing someone that they should buy a product like yours, and proceed directly to only having to convince the committed consumer to buy your product instead of one from your competitor, then AI can greatly aid the consumer in picking the best product for them.
Helping the seller make the sale and helping the consumer pick the best product for them are two very different things and accomplishing each one requires different marketing strategies.
How Committed Consumers Pick A Product Now
Right now, if my portable air conditioner has died and I’ve decided to replace it, I might go to Ace or Home Depot or Amazon and look at features, prices and items on sale. Maybe I would Google “portable air-conditioner product reviews” and then I might click on an article titled: The Five Top Portable Air Conditioners For 2024.
How AI Might Change Things
Now, let’s add AI to the mix. Let’s assume that Google has added an AI search window.
Instead of either doing all the above types of research or wandering into Lowe’s and just picking whatever happens to be on sale that day, now I type the following into a Google AI search box:
“I want to buy a portable air conditioner for a room that’s ten feet wide, twelve feet long and with a ceiling eight feet high. It’s a bedroom so it’s very important that the unit be very quiet, but it also has to be durable because I don’t want to have to replace it in two or three years. In addition to being quiet and durable, I want one that’s under $400 including shipping costs. It has to be capable of cooling the room to 75 degrees when the outside temperature is as high as 100 degrees. Show me models I can buy in order of increasing price. Because I’m a Prime member, I prefer to buy from Amazon, but I could buy from other sellers if they have a better deal, including shipping costs, on the best product for me.”
Ten seconds later I get a page and a half reply explaining my options and telling me that LG and Black and Decker are the most reliable brands; that a 6000 BTU unit will be able to meet my cooling needs; that I can buy an LG with a 4.5 star rating from Amazon with a discount coupon it has found for a total price of $320 including shipping plus tax, and I can buy a Black and Decker with a 4.3 star rating which is slightly noisier from Amazon for $280 with free shipping, plus tax.
Links to the Amazon pages for both units are included. It also lists three other products which it believes are less desirable for reasons it states.
If I could shop like that, then within five minutes or so I could click on Amazon’s LG or Black and Decker BUY button and be done.
Amazon Will Have To Do The Same Thing
Of course, Amazon would be smart to offer that service itself so that shoppers would not be exposed to the risk that Google’s AI’s might steer them to the LG or Home Depot web sites instead of to Amazon.
Special Coupons And Referral Commissions
Of course, sellers like LG and Black and Decker would likely make deals with Google to offer a special discount to customers sent to them by Google’s AI.
For example, while the price for the LG on Amazon might be $325 the price on the LG site for customers that arrived via the Google AI link might be reduced by a special “coupon” to only $300.
LG might also make some special deal with Amazon for its AI service, e.g. “Cut your commission by $10 and we’ll give the customers who buy these particular models from you during this period of time a $25 discount.”
Free AI Search As A Prime Perk?
In order to boost the sale and retention of Prime customers, Amazon might make its AI sales “consultant” free to Prime members but subject to a $1/search fee for non-prime members. The $1 fee could be refunded if the non-Prime customer purchased a searched-for product in the next thirty days. Amazon would need to do the math to determine if in practice this would increase or decrease their net revenues.
Competing AI Search Services
Walmart would, of course, want to offer a similar AI Sales Consultant tool for people using the Walmart website, but it would only search for products available from Walmart which is a much smaller universe of offerings than the products available from Amazon.
I would expect that several independent web sites would also offer similar free AI Sales Consultant tools which would be financed by commissions from sellers on referred sales.
If Amazon does this well, it is positioned to be the big winner here. If Google’s AI Sales Consultant is easier, smarter, quicker, and provides more useful results, then it will be the big winner.
How Would A Really Good AI Search Consultant Work?
It Would Ask The Buyer Questions
A really good AI Sales Consultant would be smart enough to engage in a dialog with the buyer, asking, for example,
- What’s the zip code where the A/C unit will be used?
- Is the room insulated?
- How many windows does it have?
- Are the windows single or double glazed?
It might be smart enough to check which brands are harder to install, and determine if those brands have contractors nearby who could install the unit and what the cost of installation is likely to be.
The AI Sales Consultant might ask how important the cost of operation is to the buyer and then tell the consumer how much the electricity to run each of the top three units for eight hours would cost.
A really good AI Sales Consultant would ask some “On a scale of 1 to 10, how important is [durability, energy cost, price, quietness, consumer ratings . . .] to you?” questions and then use a reasonably clever algorithm to create a final ranking of product choices.
It Would Deep Dive Into & Evaluate Customer Ratings
I say “reasonably clever” because a rating of 4.8 stars based on 47 reviews does not have the same reliability as a rating of 4.8 stars based on 12,294 reviews, nor is a rating of 4.5 based on 2,000 five star reviews and 2,000 four star reviews with no reviews lower than four stars of the same value as a 4.5 star rating based on a large number of five star reviews and a material number of one and two star reviews.
And even more nuanced is the interpretation of the ratings.
Were the high scores in product quality, durability or performance and the low scores in customer support, versus ratings with high scores in customer support and product performance and low scores in quality and durability, or high scores in performance and quality with low scores in ease of use?
The emphasis the consumer puts on performance, durability, quality, ease of use, and customer support coupled with the ratings’ breakdowns, the overall ratings score, the number of reviews and price will be crucial in the final ranking of the best product choices. The sophistication of the algorithm that combines all these numbers and comes up with a final score will be crucial.
I wrote a Medium article about inventing a better way to interpret product ratings here:
Advertising Is Now Marketing’s Number One Tool For Selling To An Uncommitted Consumer
Marketing uses many tools to motivate a consumer to purchase a product they weren’t already planning on buying in the near future — contests, event sponsorship, direct mail, and discount coupons to name a few, but the primary tool is mass-market advertising.
Virtually all non-government communications systems — television, radio, the internet, newspapers, magazines, etc. — are funded by advertising dollars.
What would the world be like if that changed, if 70% of mass-market advertising could be replaced by AI tools?
Can AI Somehow Replace Mass-Market Advertising As The Prime Marketing Tool?
The big unanswered question, the multi-billion-dollar question is, “Can AI somehow replace advertising as the primary tool used to market products to uncommitted consumers, people who have not already decided to buy that type of product?”
Somewhere in the future will your data, your personal life, become so available that an AI might pop up on your phone or laptop some morning and say:
“Dave, summer is coming and the long term forecast for your zip code is at least 22 days with temperatures over 95 degrees. Have you considered putting a portable air conditioner in your bedroom? Several good models are available for under $325 with little to no installation required. If you purchase one on your B of A rewards VISA card, the bank will give you a $12 refund on your purchase. Would you like me to show you a list of the top four models?”
Or maybe:
“Dave, I checked your Safeway Rewards card and saw that you regularly purchase wine, hot dogs and frozen pizza. Have you ever considered to replacing some of that wine with organic wheat beer? The calories are less and wheat beer’s flavor is a better match to pizza and hot dogs than wine. Coors is test-marketing a new wheat beer, Coors Wheat, in your area. I can create a 25% off coupon for you that you can use at your Safeway on Jenner Avenue 1.2 miles from your home. Would you like me to send that coupon to your Samsung phone?”
These notions only scratch the surface of what marketing might look like in ten years.
Will mass-market advertising drastically decline? Will we miss it? Will we be glad it has gone the way of highway billboards?
Where are you now, Burma Shave?
— David Grace (Amazon Page — David Grace Website)
